Special Report

The Wishlist

March 2012

Pre-Budget: The Wishlist

CW asked industry players what they were looking for in Budget 2012. Here are some answers, across sectors.

Steel

Priyanka Gupta, Executive Director, MPIL Steel Structures Ltd“To speed up infrastructure growth, the government should frame a suitable plan to promote public-private JVs and influx of FDI. It should not allow the deadlock on GST to remain for an extensive period. For the country to continue on its growth trajectory of 8-9 per cent, the requirement for sustainable infrastructure investment is paramount. The government needs to accelerate measures for investments in infrastructure projects through FDI and control volatility in prices of steel. Particularly, given the rising cost and high inflation domestically, the government should consider increasing export duty on iron ore and increase import duties that would prevent Chinese makers from flooding the markets. Also, long-term tax holidays should be offered to set up new units in the country, FDI in the infrastructure space to open up growth opportunities, and greater tax relief for infra funding.”

Equipment

Tushar Mehendale, Managing Director, ElectroMech“Clarity on the roll out for Goods and Services Tax (GST) can effectively remove several internal trade blockages and enable the government to get better revenues. The government should also look at plugging budget deficits by not succumbing to populist measures like food security employment guarantee schemes and further subsidies. Somewhere down the line, the government seems to have lost its way; we need to get hardcore capitalist measures back on track.”

Michael Schmid-Lindenmayer, Managing Director, Putzmeister Concrete Machines Pvt Ltd“We are looking forward to a Budget that gives a boost to the Indian infrastructure and real-estate sector. As construction equipment suppliers, we are directly related to the overall growth of the construction industry and hope for an increased allocation to the infrastructure sector and announcement of policies that will give an impetus to the construction industry. The government should also focus on timely execution of projects by announcing suitable ways and measures. We are expecting the announcement of lots of public-private projects in the forthcoming Budget.”

Anand Sundaresan, Managing Director, Schwing Stetter & CII Chairman, Chennai Zone“The manufacturing sector is looking for clear and confirmed time targets for implementation of GST. In the last budget, the government withdrew the input credit of service tax paid for construction work of a new manufacturing facility, thus increasing project cost by almost 3.5 per cent – this should be re-viewed and rolled back. As for specific issues relating to the construction equipment industry, excise exemption under notification 108/95 CE dated August 28, 1995, is ambiguous; the responsibility vested on the manufacturer should be removed as the manufacturer has no control on the machine. Similarly, excise exemption under notification 34/2006 CE dated June 14, 2006, is also ambiguous – 5 per cent levy of excise duty is an additional burden on manufacturers.”

Vipin Sondhi, Managing Director, JCB“Increasing the GDP with a clear fiscal consolidation roadmap will perhaps be the prime targets of the finance minister. We saw several interest rate hikes in the previous fiscal, and can expect some relaxation on this front in 2012-13. Infrastructure development should continue to remain the focus area. The industry looks forward to a uniform tax structure across the country. A uniform roll out of GST will help reduce operational difficulties, increase efficiencies and establish a trail for legitimate tax payment. Further, Budget 2011 levied MRP-based excise duty on packaging activity of parts, components and assemblies of earthmoving machinery with a retrospective effect from April 29, 2010. The earthmoving equipment industry saw a decline in 2008 and 2009 and the levy of excise duty on packaging activity of spare parts further strained the industry as the duty was not recovered from the buyers of spare parts. Further, the demand of interest for the period of levy seems unjustified. The government should intervene and a suitable amendment made to levy the excise duty on packaging activity of parts from the date of the enactment of Finance Bill 2011 and the retrospective period of levy should be withdrawn. Inclusion of earthmoving equipment for incentives in the Focus Product Scheme will go a long way in upgrading the quality of the products, bringing in advanced manufacturing skills in operations and boosting the image of India as the engineering hub for the world. Further, regular government reviews to clear the bottlenecks in infrastructure project execution will provide a fillip to the roads, power, coal and ports sectors.”

Realty

Jitendra Jain, Managing Director & CEO, Neev Group“The Budget must provide incentives to developers focusing on the mid-market housing segment as it did for the affordable segment last year. Further, it must focus on reforms to simplify the tax structure, define a unified taxation system, and implement the Special Residential Zones (SRZs) to meet the growing demand. High-interest rates, delay in approvals and escalating input costs must be addressed. Increase in tax exemption limit will ensure higher disposable income, thereby encouraging further investment in real estate. We hope the Budget provides momentum towards reforms and grants ‘industry’ status to the real-estate sector.”

Surinder Chopra, Managing Director, SCSL Buildwell Pvt Ltd“Having a house is a priority for each and every one. It’s an industry on which a number of other industries are dependent and is a major employment generator. In the past two to three years, this industry has been under the service tax regime, which influences prices to a great extent; as the demand for housing will be exponential, we need to relook at the levy. The government needs to take some steps to revive this industry. It should also consider an increase in FSI.”

Pranab Datta, Vice-Chairman & Managing Director, Knight Frank India“Tapering economic growth and recent political developments have raised a question on the fate of big ticket projects. Although the year started with the government allocating over 48 per cent of total planned expenditure in the 2011-12 Budget, many projects could not take off owing to delays in approval. New project launches have dropped and growth rate of core industries that contribute to infrastructure has slowed down. To sustain a healthy GDP growth rate, equivalent investment in infrastructure is required. The Budget should focus on fiscal incentives, like the tax rebate under 80CCF for investments in infrastructure bonds announced last year, to help increase infrastructure spending. We need a roadmap to address the challenges of rising urbanisation. Further, strategic partnerships, like the one in the case of Delhi Mumbai Industrial Corridor (DMIC), should be initiated on other projects dying for government attention.”

T Chitty Babu, Chairman & CEO, Akshaya Homes“The government should roll out an incentive-based IT policy for tier-II and -III cities (like STPI) to promote IT and generate more employment. The scope of the 1 per cent interest rate subsidy for loans towards affordable housing should be increased to include a wider price band of budget housing to benefit home buyers. We must allocate more funds to the Rajiv Awas Yojana (RAY) for urban housing; enact provisions for special residential zones (SRZs) to incentivise the growth of housing stock at targeted locations; relax FDI up to 51 per cent into multi-brand retailing; increase infrastructure spending in urban areas to unlock the value of hidden land assets in suburban and peripheral districts; and increase outlay to the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). Specifically, we need to provide single-window clearance for real-estate development projects. Government intervention is required to grant industry status to real estate; relax norms for repatriation of FDI in real estate; render the market environment more investment-friendly; and enact legislation on REITs to provide exit opportunities to real-estate investors.”

Lalit Kumar Jain, Chairman and Managing Director, Kumar Urban Development Ltd“Although, prudence in government is necessary, fear and delay are the worst enemies of growth. We need to develop a culture of minimum governance and regulation. The government will have to identify areas of growth, requirement of funds in the sector and proactive policies to create urban infrastructure and housing supply. The Reserve Bank must not act on a whim and must take the industry into confidence while coming out with circulars and policies. We would like to see a special policy on the lines of SEZ for affordable housing; exemption of income from tax for all rental earnings from housing; removal of the limit of number of units held for capital gains; taxation in capital gains on a par with stock market capital gains; and housing being given the status of infrastructure as recognised by the World Bank.”

Hari Challa, Managing Director, Aliens Group“Looking at the weak markets worldwide, the government should try to improve domestic growth by giving a fillip to manufacturing, increasing foreign investment and boosting investor confidence. Interest rates and inflation are two specific areas that will have an impact on the overall economy. With reference to real estate, hopefully the land acquisition bill will be considered. Indeed, quicker land acquisition and transparency in approvals will be welcomed.”

Sachin Sandhir, Managing Director, RICS South Asia“Priority areas include incentives for improving housing supply and affordability; creation of a dedicated housing development fund and promotion of housing associations; a 100 per cent income tax rebate for housing development where all units constitute affordable housing (Section 35AD); a tax holiday to promote development of low-cost housing; exemption for pre-fabricated concrete slabs to be maintained (Section 80 IB 10); and consideration of taxation on vacant land. We should strengthen microfinance mechanisms; and provide interest subvention on housing loans and tax credits for first-time home buyers. Tax deducted at source on rental income (Section 24) would promote rental housing. Further, the Budget should provide a conducive environment for infrastructure development; award infrastructure status to large-scale integrated townships (Section 80 IA); provide extension on ECB limit for townships; and support the Infrastructure Debt Fund with a robust bond market. We also need to incentivise low carbon buildings and infrastructure; consider a phased introduction of ‘Green Taxation’; and continue to support the National Clean Energy Fund and encourage renewable forms of energy, including exemption on solar power equipment import. Further, the government must create an enabling environment for real-estate and construction activities; get clarity on the GST; create a vibrant investment market through a liberalised FDI policy; and better channel funds for skill development initiatives.”

Contractors

M Murali, Director-General, National Highways Builders Federation“The government needs to promote investment in the infrastructure sector at a faster pace by attracting FDI; streamline land acquisitions by finding a way to facilitate equitable acquisition of land to check delays in land-intensive projects; and quickly build a consensus on the land acquisition bill. To achieve targets in the road sector, the government must step up investment in the sector by creating a consumer-friendly policy with a level playing field. Private and foreign investment will be possible only through broad-based infrastructure financing, allowing insurance and provident funds to invest and by extending tax deduction on long-term infrastructure bonds and expanding the scope of tax-free bonds. Projects must be approved faster through speedy mechanisms with time-bound clearances. The roads sector can achieve the anticipated growth by accelerated depreciation, reduction of minimum alternative tax, extension and increase in tax holiday to the infrastructure sector, skill development, and strengthening institutional mechanisms needed to fund smaller developers. The government should set up a mechanism to monitor and incentivise timely execution of projects by ensuring faster implementation. Timely execution of road projects would be crucial for the growth rate. For this, issues that hinder the pace of projects, such as land acquisition, environmental clearances, timely clearances of payments and arbitration, must be resolved.”

YR Nagaraja, Managing Director, Ramky Infrastructure Ltd“The Budget should continue to focus on fiscal incentives that help increase infrastructure spending. We are expecting this year’s Budget to send positive signals to the infrastructure industry. The slow growth in the sector is primarily driven by a range of sector-specific issues, such as land acquisition, environmental clearances, fuel linkages, high interest rate regime, and macroeconomic factors; these need to be tackled and resolved. The infra sector is still in a nascent stage and a lot of development is required in logistics, ports, railways, road connectivity, communications and power. The year 2012 will be a tough year for the industry. The only saviours would be government intervention on expanding funds, ensuring faster clearances and in the policy front as well as softening of interest rates. The government must take a multi-pronged approach to give a fillip to the sector.”

Cement

Sumit Banerjee, Vice-Chairman, Reliance Cementation“In Budget 2011, the government introduced composite rates to replace excise duty rates on cement. The industry requests a uniform duty rate without any specific component to avoid uncertainties in determination of duties payable at the factory gate. Coal is one of the most important inputs in cement production. We request the government to abolish custom duty on the import of the same. Further, the cess being levied and collected on indigenous coal should be allowed as VAT or CENVAT credit; and the VAT and excise duty paid for procurement of cement and steel for construction activities should be allowed as VAT or CENVAT credit (available earlier) to promote the development of such projects. We need parity in the taxation of building materials; while a VAT rate of 5 per cent is levied on steel, that on cement and clinker is 12.5 per cent. Currently, royalty paid on limestone results in subsequent increase in various taxes levied at every stage. It is requested to allow this royalty as CENVAT or VAT credit. Further, concessional VAT/excise duty/service tax should be considered to promote eco-friendly cement; equipment and projects for renewable energy; use of alternative fuels, and flyash and slag in manufacture of cement.”

Vinita Singhania, Managing Director, JK Lakshmi Cement“To bring the cement industry on a par with other core and infrastructure industries, the excise duty rate should be rationalised from 10 per cent to 6-8 per cent. Also, the duty structure should be simplified to be either on specific rate per metric tonne or ad-valorem basis and without relating to MRP, etc. Unlike cement, pet coke and gypsum attract duty, if imported. Therefore, the government should scrap import duty on such fuels, or basic customs duty be levied on cement imports into India to provide a level playing field. Further, it is requested that cement be stipulated as ‘declared goods’ under Section 14 of the Central Sales Tax Act to place it on an equal footing with other core-sector goods like coal, steel, crude oil, etc. The centre has proposed a dual rate of GST that would be brought to a single rate over a period of three years – we suggest that this may be introduced from the first year itself, so that all disputes/litigation towards classification can be avoided. To help the industry produce environment-friendly energy, energy generation should be treated as a renewable energy source. Further, as the initial cost for setting up solar power plants is relatively higher compared to other sources, it is requested that the import of plant, machinery and equipment be fully exempted from levy of customs duty.”

Others

Sajjan Bhajanka, Managing Director, Century Ply“CRISIL has predicted less than 7 per cent growth in GDP; keeping this in mind, the Budget for 2012-13 should be a balanced one. While it should aim at containing inflation, it should take measures to promote growth at the same time. I do not foresee any major change in direct or indirect taxes. Although GST and DTC are unlikely to be introduced in the next year, some changes in the line of GST and DTC are likely to be introduced. A thrust on housing and infrastructure is the requirement of the time; hence priority should be given to this, sooner the better.”

RK Somany, Chairman & Managing Director, HSIL Ltd“The labour law necessitates a relook to meet current industry requirements; the development of ports, roads and airports is crucial for connectivity and expansion. Critical issues to be tackled are inflation and frequent hike in interest rates, which is affecting the purchasing power of the consumer and obstructing construction projects; overhauling the ancient land acquisition law; and a boost in public-private partnership. The construction sector is facing a shortage of skilled manpower. A considerable percentage of labour lack proper training and are not certified. Government intervention in this area will give a fillip to the sector and ensure quality and safety standards.”

To share your reactions on the upcoming Budget, write in at feedback@ASAPPmedia.com

Follow us on

About Construction World Magazine

Construction World (CW) is India’s premier and largest circulated construction business magazine, covering the gamut from projects, latest construction news in India, construction trends, policies and people to topical concerns, and technology, with reason, intelligence, and objectivity.